Despite the importance of the Minerals Management Service, which manages $12 billion in contracts for oil and gas companies that drill on federal lands, “there were no rules, there was no policy, there was no guidance” for workers in a key division, Interior Inspector General Earl E. Devaney told members of the House Natural Resources Committee.

“There probably were some losses” to taxpayers, Devaney said. “But we have no idea how to estimate what they would be.”

Devaney testified at a hearing focused on reports he released last week, detailing a “culture of substance abuse and promiscuity” in the Royalty in Kind section of MMS. A division with just 55 workers, it handles $4 billion in contracts for companies that pay the government in actual energy instead of money.

Speaking at the House committee hearing, Interior Secretary Dirk Kempthorne told lawmakers that he is implementing the inspector general’s recommendations, including enhanced ethics training and putting an MMS manager in Lakewood instead of Washington.

MMS director Randall Luthi is pursuing discipline for the workers involved in the scandal, with termination a possibility, Kempthorne said.

Corrections are in place so that the contracts that were problematic now will contain needed information, Kemp- thorne said.

Contracts examined in the investigation lacked “details about the auction bids and who won the bids and what the prices were and all the things you would expect to see in a contact file,” Devaney told reporters.

In reports released last week, Devaney alleged that between 2002 and 2006, one-third of Royalty in Kind workers took banned gifts from Chevron Corp., Shell, and Denver-based Gary-Williams Energy Corp. and Hess Corp. The reports focused on 13 current and former workers, including some who allegedly engaged in sex and drug use with energy company workers.

The investigation also alleged that the former head of the Minerals Management Service, Gregory Smith, earned $30,000 in a side job for a business that provided information to oil companies. Smith also allegedly had sex and used cocaine with subordinates. He retired in 2007, during the investigation.

Smith’s attorney, Steve Peters, did not respond to a message left at his office.

The Department of Justice declined to prosecute Smith. Devaney said he would have liked “to see some people prosecuted here, but that’s not my decision to make.”

Lawmakers asked whether Devaney could have given Justice officials more ammunition if oil companies had fully cooperated with the investigation.

Companies turned over documents, and all but Chevron cooperated with interviews, Devaney said. Chevron Corp. hired an attorney for its workers.

“Employees chose to exercise their individual legal rights and declined to be interviewed,” Chevron spokesman Don Campbell said in a statement.

Devaney said the “nature of the work” the division does contributed to the ethics violations.

“It requires government workers to engage in daily, if not hourly, contact with what the government considers prohibited sources,” Devaney said, referring to people from whom government workers cannot accept gifts because they represent companies doing business with the employees’ agency.

“This particular group, because of the nature of their work, felt like they had to party and have drinks with and socialize with industry in order to get market intelligence,” Devaney said. “Obviously our investigation didn’t buy that.”

One of the companies mentioned in the MMS report, Gary-Williams Energy Corp., said that it treated the government the same way it did other crude-oil suppliers when it spent less than $3,000 to host agency employees at company functions. The company said it would change how it conducts business with the government in the future.

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